Friday, July 07, 2006

Shortcut & Co. Facing Serious Sleaze Allegations

Over the past year or more many Chundrigar Road–Wallas have been alleging Shortcut’s involvement in share market profiteering. Mostly they cited his burgeoning friendships with two of the biggest Stock Exchange operators as evidence of the ex-Citibanker’s alleged financial misdemeanors. Some even maintained that Shortcut’s pal ‘Mota’ acts as his middleman in Karachi.

These could have been dismissed as colourful Chundriar Road'side' gossip - just loud whispers and unproven allegations - but when the former Chairman of the Securities and Exchange Commission of Pakistan (SECP) openly joins in the fray the proverbial excrement has to hit the fan ( your Blogger's comment: Not that it will change anything!)

Today’s newspapers are filled with stories covering public statements made by Dr Tariq Hassan (former chairman SECP). These statements were made in Islamabad during and after a meeting of the National Assembly Standing Committee on Finance and Revenue which is investigating the US$ 13 billion crash in the stock market in March 2005.

Here are some interesting excerpts:

Daily Times: Special observers’ to keep ex-SECP chief on back foot
National Assembly Standing Committee on Finance and Revenue Chairman Anwer Ali Cheema invited “special observers” at the committee’s meeting on Friday on the directives of Prime Minister Shaukat Aziz, to keep former Securities and Exchange Commission of Pakistan (SECP) chief Dr Tariq Hassan “on the back foot”, sources told Daily Times.Sources said that the special observers had been invited to provide “some room” to the committee chairman during the proceedings.

… Sources said that during the meeting, the committee chairman repeatedly interrupted Dr Hassan while hearing his testimony. However, he was eventually allowed to read his letter to the KSE Policy Board after “hectic efforts” by Members of the National Assembly (MNAs) Kashmala Tariq and Sardar Ayaz Sadiq, sources said. Dr Hassan said in his testimony that he had put some questions to top government officials and wanted answers, they said.

The News: State minister, adviser accused of links to brokers

ISLAMABAD: Former chairman of Securities Exchange Commission of Pakistan (SECP) Tariq Hassan alleged during an NA bodymeeting on finance and revenue on Friday that the Prime Minister’s Adviser on Finance, Salman Shah and Minister of State Omar Ayub Khan, had links to powerful brokers, who were involved in the multibillion rupees scams in the stock exchanges

.…Sources said the situation became tense when Salman Shah and Tariq Hassan allegedly exchanged hot words, when the latter told the meeting how he was pressurised by these top guns to help the brokers mint money and finally he was ousted from the office.

However, both Shah and Omar denied the charges, terming it merely Hassan’s ‘personal opinion’ as there was no authentic proof available against them. Hassan did not mince his words when he said that he was under pressure even from Prime Minister Shaukat Aziz to keep close contacts with top guns of stock markets, who were actually involved in the whole scam.

Dawn: ‘Big fish’ allowed to escape net: Tariq: Ex-chief of SECP issues‘white paper’

Former chairman of the Securities and Exchange Commission of Pakistan (SECP) Dr Tariq Hassan on Friday issued a ‘white paper’ on the March 2005 stock exchange crash, and claimed he had reached close to a ‘few big fish” when he was shown the door.

“The last orders on my table, when I was removed from my post on Eid day, was the appointment of forensic investigators to probe the few big brokers held responsible by the task force (for the crash),” Mr Hassan told reporters after presenting the so-called white paper to the National Assembly’s Standing Committee on Finance and Revenue.

..“They (the government) have no other option but to continue with the reforms I had initiated but was not allowed to complete. The moral pressure on them is building and compelling them to get hold of the big fish. Otherwise, I fear form will prevail over substance,” said Mr Hassan while commenting on the committee’s decision to proceed with the probe.

MNAs from the ruling party and opposition quoted Mr Hassan as saying in the meeting that he would never retreat from his stand that he had not been allowed to go ahead with reforms.

The former SECP chairman asked how could he get hold of those powerful brokers who, he alleged, had access to the prime minister.

During the nine-hour meeting, Dr Hassan faced tough questions from the Minister of State for Finance Omar Ayub Khan and Prime Minister’s Adviser Dr Salman Shah, apparently because he had mentioned their names in letters he had sent to the prime minister and accused them of pressurising him not to replace Carry-over Transaction with margin financing, one of the main causes of the crash.

When Dr Hassan was busy answering journalists’ questions after the meeting in the committee room, a government official approached him and asked him to leave as Dr Salman Shah, Omar Ayub and incumbent SECP chairman Raziur Rehman were to hold a news conference.

“Dear, you people have invited me to this meeting,” said Dr Hassan to the official while leaving the room.

Ruling party MNA Kashmala Tariq told reporters that there was a threat to Dr Hassan’s life because he had taken on some powerful people.

For the first 50 minutes of the meeting, Dr Hassan was not allowed to speak and it was only after a protest by opposition MNAs that he was given an opportunity to do so.

Starting his presentation, Dr Hassan quoted from Shakespeare’s Julius Caesar: “The fault, dear Brutus, is not in our stars, but in ourselves that we are underlings.”

SECP chairman Raziur Rehman was asked by Dr Hassan and Ms Tariq why had the reform process had been stopped and why task force’s recommendations had not been implemented, which resulted in another market crash.

Finally it appears that Dr Tariq Hassan’s replacement as Chairman SECP Raziur Rehman has not been spared either. According to Dawn Raziur Rehman has had to make a rather embarrassing denial against “allegations that he had been one of the AKD consultants”.

For those not familiar with the initials AKD, they stand for Aqueel Kareem Dehdi – one of the biggest players on the Karachi Stock Exchange.

Your Blogger once again doesn’t expect any truth to emerge from this scandal.

Our Head Chowkidar is apparently completely preoccupied with sheltering his façade of a civilian government in preparation for forthcoming the election, or should we call it a uniformed ‘re-election'?


You may well ask: Who is this Dr. Tariq Hassan?

This is a ‘Googled’ bio of Tariq Hassan prior to being personally selected and appointed in 1999 as ‘Adviser to the finance minister of Pakistan’ by Shaukat Aziz, then Finance Minister:

*obtained his Masters and Doctorate degrees from Harvard Law School
* worked as a lawyer in both private and public sectors internationally.
*in addition to private practice in London, New York and Pakistan, he worked for the World Bank and the International Fund for Agricultural Development.
* taught law and has been teaching law and lectured at different institutions in Pakistan and the US in addition
*lectured on international banking law at the National Law Centre, George Washington University, Washington, DC from 1995 to 1999.
*has written and published extensively on issues relating to international law, law and economics, law and politics in various journals, magazines and newspapers in Pakistan, UK and US.

In August 2003 Shaukat Aziz appointed him as chairman of the Securities and Exchange Commission of Pakistan (SECP).


Five months after offering to resign Dr Tariq Hassan Shaukat Aziz opted to sack him instead. On 21 June 2006 the Daily Times reported:

ISLAMABAD: Former Securities and Exchange Commission of Pakistan (SECP) chairman Dr Tariq Hassan offered to resign five months before he was forced out, saying that the advisor to the prime minister on finance and the minister of state for finance were hindering the implementation of stock market reforms, Daily Times has learnt.

According to documents seen by Daily Times, Hassan wrote to Prime Minister Shaukat Aziz on August 4 offering his resignation because “interventions” from the two officials were making it difficult for him to reform the stock exchanges and maintain direct contact with the main players of the Karachi Stock Exchange (KSE).

The prime minister did not accept his resignation at the time and pledged him his full support, but just five months later on January 9, 2006, himself asked Hassan to resign because he (Hassan) had not been able to maintain a good relationship with market players. However, this time Hassan refused to resign and also turned down an offer to become the PM’s legal adviser.

The Finance Division then appointed Raziur Rehman Khan as new chairman of the SECP during the Eid holidays with immediate effect.

Hassan was once a trusted friend of Aziz and it was in fact Aziz who summoned him to Pakistan from abroad to implement the market reforms and regulations prepared by a commission headed by retired Supreme Court chief justice Ajmal Mian.

In his letter of August 4, Hassan said: “Recent market interventions by senior government officials have resulted in delay of certain reform initiatives. This is likely to not only impede the overall reform process but may also have a negative impact on the reform programme itself. Therefore, I seek your permission to resign.”

“I had agreed to your suggestion of a temporary freeze and limited roll-back (on the phasing out of Badla financing) in the larger interest of the country’s economy. What I am now being asked to do additionally by your advisor is not only excessive but would also be detrimental to capital market reforms,” he wrote.

He wrote his second letter to Aziz on January 9 after a meeting with the prime minister’s principal secretary Javed Sadiq Malik in which he was offered the slot of legal advisor and asked to resign as SECP chief. Hassan refused, saying this was a crucial time because stock market players were again pressing the SECP not to carry out its reforms. “I … request you to either reconsider your suggestion or at least give me an opportunity of presenting my case,” he wrote.

He turned down the offer of becoming the prime minister’s legal advisor.

In a separate note to Aziz on capital market reforms on July 20, 2005, Hassan wrote: “Direct interventions in respect of Badla financing on the part of the minister of state for finance and advisor to the prime minister on finance and revenue have gravely undermined not only the hard work of the SECP but also the avowed policies of the ministry and the specific statements made by the prime minister in this regard,” he stated.

He said as a result of distortions created in large part by ministerial interventions in phasing out Badla financing, the SECP had no option but to suspend the phase-out process recently. “At that stage, the SECP was and remains appreciative of your firm resolve not to roll-back the phase-out of Badla financing, despite suggestions to the contrary made by the advisor on finance and revenue and the minister of state for finance, more so because it represented a clear understanding of the menace that Badla financing poses and the importance of its phase-out for eliminating manipulation from the market.”

Hassan wrote to his board members on January 30, 2006, saying he had been removed for introducing new regulations phasing out the Badla system, introducing forensic auditing, electing a new chairman from outside the brokers community, and fining some 100 brokers for the March 2005 market crash.


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